Building Momentum
Q3 2023 Business and Financial Review
All dollar amounts are presented in | 1 |
CAD dollars unless otherwise noted. |
Forward-looking statements and Non-IFRS measures
This presentation contains "forward-looking information" within the meaning of applicable securities law. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which the Company operates, as well as beliefs and assumptions made by the Company related to its business, operations, expectations and external environment.
- The ongoing effects of the post-pandemic global economies and macro-economic trends, including the war in Ukraine, create many uncertainties which may have a significant impact on the Company's operations, business continuity and financial results. In addition, the Company's operational, financial and environmental performance may be significantly impacted by factors such as supply chain disruption, cybersecurity incidents, availability of labour and materials, inflation, agricultural commodity markets, foreign exchange rates, interest rates, shifting demand balance between retail and foodservice channels, product mix, productivity, access to markets and geopolitical instability.
- The Company's expectations with respect to the growth of its meat protein business, expectations for performance, anticipated growth in sales, Adjusted EBITDA margin, gross margin, the expected contribution of capital projects (and the timing of same), and magnitude of impact of factors affecting performance are based on a number of assumptions, estimates and projections, including but not limited to: the impact of global pork market dynamics, post-pandemic economic volatility, supply chain constraints and effectiveness, inflation, commodity prices, ramp-up of capital projects, hog and pork processor margins, demand for pork and access to export markets, poultry markets and supply management, cybersecurity risks to operational and financial performance (including time and cost to recover from an incident), timing and effect of pricing action, foreign exchange rates, market share, growth in demand for sustainable meats and branded products, customer and consumer behaviour, competition, litigation exposure, implications of foreign animal disease and availability of labour and labour performance considerations.
- The Company's expectations with respect to its targets and business plans for the plant protein business and expectations with respect the shift in the Company's investment thesis and its ability to achieve its goal of becoming Adjusted EBITDA neutral by the end of 2023 are based on a number of assumptions, estimates and projections, including but not limited to: accuracy of the market analysis and future growth potential in the category, market share, the impact the post-pandemic economic volatility, supply chain constraints and effectiveness, inflation, go to market strategies, results of operational optimization, results of brand renovation initiatives, cost reduction initiatives, foreign exchange rates, customer and consumer behaviour, competition, timing and effect of pricing action, availability of labour and labour performance considerations, litigation exposure, and the ability of the Company to calibrate its business model to the expected market opportunity.
- The Company's assumptions about capital project expenditures, timing to complete, expectations with respect to return on these investments, and future capital investments are based on a number of assumptions, including but not limited to: successful commissioning and ramp-up of the projects, availability and cost of materials and labour, contractor performance and productivity levels, supply chain constraints and effectiveness, quality of estimating, weather conditions, project scope, ability to achieve operational efficiencies, demand for products from these capital investments, preventative maintenance needs, and future operational and strategic investment opportunities.
- The Company's ability to achieve its environmental targets assumes that it can increase the pace of emission reductions through a combination of near-term and longer-term initiatives, as progress toward the targets has slowed for a variety of reasons, most of which have been exacerbated by the challenges created by the post-pandemic environment, together with the timing of production from new capital projects.
These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict. These assumptions have been derived from information currently available to the Company, including information obtained by the Company from third-party sources. These assumptions may prove to be incorrect in whole or in part. In addition, actual results may differ materially from those expressed, implied, or forecasted in such forward-looking information, which reflect the Company's expectations only as of the date hereof. Please refer to the sections entitled "Risk Factors" and "Forward-Looking Statements" in the Company's Management Discussion and Analysis for the year ended December 31, 2022 and for the quarter ended September 30, 2023 for additional detail.
In addition, this presentation contains the following non-IFRS measures:
Adjusted Operating Earnings: Earnings before income taxes and interest expenses adjusted for items that are not considered representative of ongoing operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred.
Adjusted Earnings per Share: Defined as basic earnings per share adjusted for all items that are not considered representative of ongoing operational activities of the business, and items where the economic impact of the transactions will be reflected in earnings in future periods when the underlying asset is sold or transferred.
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization: Defined as Adjusted Operating Earnings plus depreciation and intangible asset amortization, adjusted for items included in other expense that are considered representative of ongoing operational activities. Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided by sales.
Net (Debt) Cash: Defined as cash and cash equivalents, less long-term debt and bank indebtedness.
Construction Capital: Defined as investments and related financing charges in projects over $50.0 million that are related to longer-term strategic initiatives, with no returns expected for at least 12 months in the future and the asset will be re- categorized from Construction Capital once operational.
Free Cash Flow: Defined as cash provided by operations, less Maintenance Capital (defined as non-discretionary investment required to maintain the Company's existing operations and competitive position) and associated interest paid and capitalized
Please refer to the Company's Management and Discussion and Analysis for the quarter ended September 30, 2023 (as filed on SEDAR) for additional information on non-IFRS financial measures.
2
Maple Leaf Foods has established itself as an iconic, purpose-driven Canadian food company
1995 2005
Foundation Building Era
Structural Adjusted
EBITDA Margin ~3.5%
-
Maple Leaf acquired by McCain
Family and Ontario Teachers'
Pension Fund - Established Culture, Values, Operating Rhythms
- 30+ Meat acquisitions
- 2008 Food Safety tragedy
- First scale investment: Brandon Pork facility
2010 2017
Transformation Era
Delivered 10% Adjusted EBITDA Margin
- Invested ~$1B to increase scale, secure Prepared Meats competitiveness
- Construction and start-up of Heritage facility in Hamilton, Ontario
- Migrated multiple legacy systems to
SAP - Divested non-core assets
- Became a singularly focused Protein Company
2017 TODAY
Purpose Driven,
Set to Deliver
Established 14%-16% Adjusted EBITDA Target (2017)
- Established Purpose, Vision and Blueprint for growth
- Acquired VIAU, Lightlife and Field Roast
- Launched the Centre for Action on Food Security
- Invested over $1B capital in London Poultry and Winnipeg Bacon Centre of Excellence
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 3 |
Our ambitious Blueprint continues to guide us into the future
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 4 |
Driven by our purpose of Raising the Good in Food, Maple Leaf Foods has demonstrated authentic leadership in Sustainability and Shared Value creation
Better Food
- Established leadership in Sustainable Meats production, including Greenfield Natural Meat Co. brand, fueling U.S. market expansion
- Extensive portfolio includes Vegan Certified, Halal, sustainable options, and plant-based protein
- Simpler and more natural ingredients including Maple Leaf PRIME® and Maple Leaf Natural Selections® brand innovation
Better Care
- 100% of Maple Leaf-owned sow spaces converted to Advanced Open Sow Housing system*
- 99.1% reduction in antibiotic use in hog operations since 2014
- 100% of owned sow, nursery, and finisher barns installed with environmental enrichments
- 98% of chickens processed transported in less than 4 hours
Better Communities
- Advancing our goal to reduce food insecurity in Canada by 50% by 2030
- Through our Centre for Food Security committed over $12M to 27 innovative partnerships since 2017
- Industry leader in workplace safety with 93.6% improvement in plant recordable incident rate since 2012; 30 sites had zero injuries**
- Extensive Diversity, Equity & Inclusion (DEI) strategy supported by six Employee Resource Groups
Better Planet
- World's first major Carbon Neutral food company and first Canadian Food Company to set a science-based target
- 4x increase in supplier crop acres using regenerative agriculture practices since 2021
- Developing plan to achieve 100% sustainable packaging; recent transition to 100% recyclable trays at new London Poultry plant
- Reduced solid waste intensity by 17.1% since 2015 and have achieved a company- wide landfill diversion rate of 92.3%
* As of the end of 2021. Newly acquired sites to be converted. | ** As of December 31, 2022 |
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 5 |
Our portfolio of leading brands includes the #1 and #2 brands in the category
#1 | #2 | #1 |
Schneiders is #1 brand in total Packaged Meats
Maple Leaf is #2 brand in total Packaged Meats
Greenfield is the #1 brand in Sustainable Packaged Meats (#3 in U.S.)
#1 | #1 |
Maple Leaf Prime is the | Mina is the #1 Halal |
#1 brand in fresh poultry | brand in fresh poultry |
#3
In Refrigerated Plant
Protein; #1 in Tempeh, #1
in Hot Dogs, #1 in Bacon
SOURCE: NIELSENIQ, MARKETTRACK, SPINS-IRI TOTAL MULO+NATURAL CHANNEL FOR L52 WEEK PERIOD ENDING 9/10/2023 | |
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 6 |
We are approaching the next natural inflection point on our journey to a Purpose-driven,Globally-admired and Brand-led CPG company
Stabilize
The business in a post-pandemic economy
- Restore the health of the supply chain
- Price for inflation
- Disciplined capital spending
- Sequential recovery in Adjusted EBITDA margins in 2023
- Pork Complex market recovery
Realize
Our near-term potential
- Deliver $100M benefits from London Poultry
- Deliver $30M benefits from Bacon Centre of Excellence
- Achieve Adjusted EBITDA neutral in Plant Protein
- De-leverthe balance sheet
Capitalize
On the platform we have built, Organic + Strategic
- Brand-ledgrowth, constant Renovation & Innovation
- Expanding geographic reach
- Optimization of existing world-class assets, enabled by technology and automation to drive out cost
- Shareholder-friendlycapital allocation/M&A with U.S. focus
- Boldly advancing our Sustainability Agenda
Delivering 14%-16% Adjusted EBITDA Meat Margin Target
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 7 |
Excellent progress executing our playbook in the third quarter of 2023
Meat Adjusted | London |
EBITDA margin | Poultry Plant |
improved to 11.4% | on track |
Third consecutive quarter | Over 85% of production |
of Adjusted EBITDA Margin | online; last plant final |
improvement | transition in November |
Bacon Centre
of Excellence ramp up continues
Maple Leaf "Ready Crisp" bacon fully in market; focus on onboarding new customers
Plant Protein Adjusted EBITDA improved over 60%
Expect to achieve Adjusted EBITDA neutral by the end of 2023
Disciplined capital management
Year-to-date capex spend $156 million; full year capex expected to be approximately $200 million
New product innovation launched in market
Building on success of brand renovation, expanding demand space platforms
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023
8
New product innovation will continue to stimulate consumer demand and fuel growth
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 9 |
Clear line of sight to 14% - 16% Meat Protein Adj. EBITDA margins in normal markets
14% - 16% | Executing the |
Blueprint |
Adj. EBITDA Margin | ✓ | ||||
Completing the ramp up of | |||||
London and Bacon CoE | |||||
~250 bps | capital projects | ||||
✓ Fully leveraging the strength | |||||
∆ to Normal | of our leading brands | ||||
11.4% | ✓ Doubling down on new | ||||
Market | |||||
Conditions | product innovation | ||||
9.3% | |||||
✓ Broadening our reach with | |||||
7.6% | U.S. focus | ||||
✓ | |||||
6.6% | Leading in Sustainable Meats | ||||
✓ Supply Chain and Operational | |||||
Excellence | |||||
Q4-22 | Q1-23 | Q2-23 | Q3-23 | ||
Actual | Actual | Actual | Actual | ||
MAPLE LEAF FOODS - Q3 2023 BUSINESS AND FINANCIAL REVIEW | NOVEMBER 2, 2023 | 10 |
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Maple Leaf Foods Inc. published this content on 02 November 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 02 November 2023 21:14:11 UTC.